LESSON 1 1 The Accounting Equation Original created

LESSON 1 -1 The Accounting Equation Original created by M. C. Mc. Laughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School CENTURY 21 ACCOUNTING © Thomson/South-Western

2 What is Accounting? Planning, recording, analyzing, & interpreting financial information (also known as the language of business) In order to do this, you must have some type of CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1 -1

3 Accounting System A planned process for providing financial information that will be useful to management Consisting of CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1 -1

4 Accounting Records To organize summaries of a business’s financial activities You will use these to create CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1 -1

5 Financial Statements Financial reports that summarize the financial condition and operations of a business CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1 -1

6 The Business – Techknow Consulting page 6 n. Business Entity – A business’s financial information is recorded and reported separately from the owner’s personal financial information. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1 -1

7 The Business – Techknow Consulting A business Service that Business performs an activity for a fee CENTURY 21 ACCOUNTING © Thomson/South-Western page 6 Sole A business Proprietor owned by -ship one person LESSON 1 -1

8 THE ACCOUNTING EQUATION page 8 n. The Accounting Equation shows the relationship among assets, liabilities, & owner’s equity It is most often stated as: Assets = Liabilities + Owner’s Equity CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1 -1

9 THE ACCOUNTING EQUATION page 8 n Asset – anything of value that is owned by the business n Liability – an amount owed by a business n Equities – financial rights to the assets of a business n Equity of those to whom money is owed n Equity of the owner n Owner’s Equity – the amount remaining after the value of all liabilities is subtracted from the value of all assets CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1 -1

10 THE ACCOUNTING EQUATION CENTURY 21 ACCOUNTING © Thomson/South-Western page 8 LESSON 1 -1

11 TERMS REVIEW n n n n accounting system accounting records financial statements service business proprietorship asset CENTURY 21 ACCOUNTING © Thomson/South-Western page 9 n n n equities liability owner’s equity accounting equation ethics business ethics LESSON 1 -1